Accounting valuation models under international financial reporting standards: evidence from some European listed companies

Abstract

The aim of this paper is to examine the value relevance of accounting information following the voluntarily IFRS adoption in the pre–IFRS period (from 2000 to 2004). Moreover, this paper compares the relevance of the two accounting valuation models as the historical cost versus Fair Value Accounting (FVA) following the mandatory IFRS adoption. We use a panel data collected from a sample of 106 firms listed at the stock exchange of three European countries (Germany, France and Belgium). The results suggest that the value relevance of accounting information in firms that voluntarily adopt IFRS decreases compared to in firms that report their financial statements into domestic standards (DS). Our findings confirm that the FVA model is more relevant than historical cost accounting model. This paper contributes to the existing literature by comparing the accounting quality of voluntary IFRS–firms and DS–firms and the choice of the more relevant accounting valuation models. This study highlights the importance of fair value for the improvement of investors' making decisions.